Tax Efficient Way to close Ltd

[RajaStyle]

Hi All

I want to close my ltd which has less than £25k remaining and my final trading week and end of year is next week. It's just been used for IT contracting, has no assets besides cash. I read something about Entrepreneur relief & not sure if possible?

I'd prefer to avoid dividends if possible, may be getting hit with the loan charge later this year so they would just go into a 40% tax rate.

I have not been impressed generally with my accountant that I set this up with a year ago, I usually get a hmrc or web link to read everytime I ask a question.

Anyway can anybody help or point me in the direction of the best way to tax efficiently close my ltd down, accountant has said I need 3 months of trading free before closure so they will extend my end of year by 3 months to maybe end of Feb.

Ideally I want to limit any further running expenses and extract the remainder amount tax efficiently & close.

Many Thanks in Advance

[jamesbrown]

Fortunately, you're right at the strike-off threshold (25k), so you can adjust accordingly and go with a simple striking off and that will be treated as a capital distribution. No need for an MvL.

[Patrick@Intouch]

It really depends on what you are going to be doing next.

If you are going to setup another company to trade through and will be carrying on the same or a similar trade then Entrepreneur's Relief would not be available.

If you are retiring or working in a different way then you may be able to claim entrepreneur's relief but this would need further discussion. It would also be relevant to discuss the shareholding of the business as this may impact the relevance of any particular treatment.

[WTFH]

Who is your current accountant?
Why are you not impressed with them?
Are all your company returns, etc up to date?
Is there any useful information you're not sharing?

[RajaStyle]

Fortunately, you're right at the strike-off threshold (25k), so you can adjust accordingly and go with a simple striking off and that will be treated as a capital distribution. No need for an MvL.

Anymore info on this ? Does this mean not extending my end of year etc?

[RajaStyle]

It really depends on what you are going to be doing next.

If you are going to setup another company to trade through and will be carrying on the same or a similar trade then Entrepreneur's Relief would not be available.

If you are retiring or working in a different way then you may be able to claim entrepreneur's relief but this would need further discussion. It would also be relevant to discuss the shareholding of the business as this may impact the relevance of any particular treatment.

Thanks I would be setting up to do the same again so guess not applicable.

[RajaStyle]

Who is your current accountant?
Why are you not impressed with them?
Are all your company returns, etc up to date?
Is there any useful information you're not sharing?

Just not proactive, never return calls. Have to chase for response, get blunt answers or a web link to read myself if ask question etc had enough. Will be end of first year so I believe all up to date.

[Craig@Clarity]

It's difficult to advise in situations like this as there's many more questions to be asked before you get an informed answer (see above comments). In general, however, there are several options for you to consider when you stop trading being

1. Keep it dormant (ticking over) in case you pick up a new gig
2. Voluntary strike it off
3. Go through compulsory liquidation or MVL

I would generally advise on keeping the company going for a few months after your current contract. If you go permie, don't like it, then you can at least fall back on your company to contract again. It'll be much more work to reverse the closure of your company than simply to hold onto it for a few months.

As you say, you only have cash in the company. Assuming you're eligible for ER, don't want to do IT contracting ever again, the £25k can be treated as capital for tax purposes. To be eligible for ER, you have to hold at least 5% of the shares with voting rights and have been a office holder and traded for at least a year. If you're closing to simply restart again, you won't get ER which then opens up the question as to why you would want to close this company down in the first place to then open up another one doing the same thing?!

Not entirely sure why you were advised to extend the company year end by 3 months though.

[Craig@Clarity]

Anymore info on this ? Does this mean not extending my end of year etc?

Are you asking for a link?

[WTFH]

Will be end of first year so I believe all up to date.

Best to go on here, put in your company name and see what it says:
Companies House service